Author: Dan Robles

The Ingenesist Project is developing a new class of business methods called The Value Game (TVG). When combined with Curiosumé, TVG forms a set of alternate economic incentives that may reward high integrity in the preservation, renewal, and acquisition of shared assets, such as infrastructure.

BidPool is an adjudicated smart contract for construction and accomplishes 2 things:

1. It lowers the cost of procurement bidding from AxB to A/B.

2. It minimizes competition costs and rewards high integrity in a bidding process.

The Value Game: Bid Pool

Problem: Procurement/bidding competition is highly redundant, consumes a great deal of resources, and promotes variability.

For example: 5 contractors may spend $10K separately marketing, researching, and bidding on a project that only one will win. Further, each contractor may win only 1 out of 5 bids. The cost of these losses is ultimately wrapped into the total market cost of the industry. The Incentive to bypass is high.

Cost of bidding = A x B;

where A = cost of goods sold, and B = number of bidders

Adjudicated Smart Contract For Construction:

Consider a process where a project owner and 5 contractors, are all selected by qualifications to play The Value Game. Each one commits a $10K promissory note into a blockchain escrow account – this is what they would spend anyway for each bid attempt. A 3rd Party Engineering firm writes the “Statement of Work” for the project. This SOW serves as common research for all contractors submitting a bid.

The Value Game:

Whoever submits the winning bid will pay the engineering fees ($10K) to the 3rd-party who produced the report. Everyone else gets his or her note cancelled or converted to a cryptocurrency to be used in future TVGs. If the owner does not select, the owner then pays for the report and can use it to hold another Value Game in the future.

Cost of bidding = A / B;

where A = cost of goods sold, and B = number of bidders

Aligned Incentives

The Value Game realigns major incentives. As such, the projects benefit from:

Improve matching of qualifications – those most qualified to perform a job will inherently produce a better price.

Improve quality and seriousness of owners – owners will not wastefully exercise contractors and resolve unknowns prior to bid.

Bid Pool is a Value Game that reduces the cost of procurement while realigning incentives to reward high integrity rather than low integrity in the construction industry. Mined value is derived from front end COGS and the reduction of downstream project risks. All additional project milestones may also be extended from the initial TVG or adjudicated on it’s own TVG.

These milestones may include contracts, work orders, exclusions, subs, insurance, financing, change orders, maintenance, repairs, future renovations, decommissioning, etc. Each milestone will be represented by it’s own block and the complete project would be represented by it’s own block chain throughout the life of the asset.

Additionally, Curiosumé would generalize TVG to allow for “anonymity-until-point-of-transaction” (AUPOT) while decentralizing the knowledge assets deployed to a project throughout its life cycle.

In a Wall Street Journal essay, two authors wrote, “The digital currency known as bitcoin is only six years old, and many of its critics are already declaring it dead. But such dire predictions miss a far more important point: Whether bitcoin survives or not, the technology underlying it is here to stay.” This session will cover what digital currency means for the engineering profession.

“Decentralization” is a term being applied to platforms that use the Blockchain Protocol pioneered by Satoshi Nakamoto, the inventor of Bitcoin. As a cryptographic currency, Bitcoin remains problematic. However, as an algorithmic protocol, blockchain technology will enable society to cheaply perform common business processes that are now controlled by institutions such as banks, insurance companies, corporations, government, etc. Today, rapidly emerging platforms are under development to bring “smart contracts” (algorithms based on blockchain technology) into the mainstream.

An important and essential variant of smart contracts is called an “Adjudicated Smart Contract” that requires an independent 3rd party adjudicator that would “flip the switch” on algorithmic agreements in finance, insurance, and decisions of governance. There is a staggering opportunity ahead for the engineering profession to position itself for the role of the adjudicator in a wide variety of important and high value transactions. The caveat is that we too must change the way that we organize ourselves.

This presentation, Decentralizing the Engineering Profession, begins with the failure of the NAFTA MRD followed by an introduction to blockchain technologies, and ending with specifications on how our profession can jump to the top of the value chain in the era of Social Capitalism – if, and only if, [the engineering profession] can choose to change.

Date:

Thursday, July 16, 2015

Start Time: 3:15 pm

End Time: 4:15 pm

Number of PDHs: 1

Speaker: Dan Robles, P.E.

Reference: Reorganizing Society in the era of Social Capitalism: Curiosumé

(Summary; crowdfunding condominium renovations with emerging platforms can lead to substantial savings when proper engineering assurance is also performed. Contact us for more information)

The 20/10 Rule

After the first 20 years, a condominium building may see a major system repair every 10 years for the life of the building. After year 20, a building may start to see increased maintenance costs on major systems. They start as small problems such as a roof leak, a broken water valve, some wood rot under a window sill, a blown compressor, etc. As the frequency and severity of the problems increase, the cost of repair and insurance claims exceeds the price of replacing the system.

The Funding Paradox

Once a system enters a mode of cascading failures, a major system renovation needs to happen immediately. The cascading failures also happen in the financial side: an insurance claim triggers higher premiums, a water damage disclosure devalues real property, frequent shutdowns cause resident complaints, and the cost of constant repairs is progressively more significant.

The backlash from enforcing special assessments on residents can be severe. People are willing to pay their fair share, but it is not fair to ask a current resident to subsidize past residents who enjoyed a trouble-free system. Nor is it fair to ask them to subsidize future residents who will enjoy a trouble-free systems after renovation. At this point, banks have you backed into a corner. Bank loans must be collateralized by liens on the community cashflow, bank fees can cost between 0.5-1.5% of the cost of repair, and interest rates can average 5% (effectively doubling the price of the work over 15 years)

The cost of having the problem has a compound negative impact on the ability to fix the problem.

Crowdfunding

Humans have a remarkable ability to adapt to constraints on their environment. When money is constrained by economic factors, people are figuring out new ways to get the job done. Today, new crowdfunding platforms are appearing for every known cause from funding start-up companies, to paying medical bills, education expenses, community coops, even public services.

Coengineers, PLLC is encouraged by what we have seen in the crowdfunding movement. These are not banks, they are a platforms that allow a community to borrow money from themselves. Instead of a special assessment, the board “borrows” the assessed value from the residents and pays it back from the dues collected over time.

3 Benefits of Crowdfunding Condominium Renovations

1. Current residents no longer subsidize future or past residents – they can carry an interest bearing loan from the HOA. A resident can move and still collect on the debt.

3. Money stays home instead of paying bank shareholders in a far off city – all fees, work, repairs, and repayments stay in the community.

A word of caution about crowdfunding for construction

One thing that banks and insurance companies perform very well is due diligence. Old institutions have long-term memory that enables them to know what types of investments work and what type do not. These institutions are very familiar with construction loans and associated financial hazards. Banks and insurance entities are vigilant in requiring a certain amount of preparation and professional documentation in place before underwriting a project. This data is matched to past data and risks are pooled and diversified. Before a community attempts a crowd fund, they should make certain that they can effectively duplicate the technical and financial due diligence that a bank or insurance company would perform.

Further, the project MUST be insurable during and after completion in order for mortgages to remain viable. It is essential that your insurance company accepts the conditions under which a renovation is performed. They are already very comfortable accepting the opinions of your bank, but will they accept the vetting of the HOA Board? Future mortgage lenders must be certain that the property was renovated to banking standards or they will not lend to future homeowners. These are serious implication that the HOA board must be aware of.

Crowdfunding Assurance Engineering

Coengineers, PLLC specializes in representing the community’s best interest by performing the condition assessment, the reserves study, the feasibility study, the statement of work, contractor vetting, and ultimately, the maintenance plan for HOA properties attempting to crowd fund their projects. Coengineers, PLLC has developed a set of processes that may accomplish these goals specifically in support of crowdfunding platforms.

Pillars of Engineering Assurance

The condition assessment tells the HOA exactly what the problem is and the scope of the required repair. The reserve study looks at all property systems and determines their estimating service life and scope of repair over a 30-year period.

The feasibility study will compare various options that an HOA may be considering for scope, cost, and payback. The statement of work tells the contractor exactly what needs to be performed in contractual form.

Contractor vetting is required to make certain that the contractors’s capability and solution are consistent with the objectives of the community. It is also important to verify milestones of the project and adjudicate the release of funds to the trades for work completed. Finally, the community needs to know the precise maintenance schedule which will ensure that the new system experiences the maximum service life.

Quality is everything

One other thing to keep in mind is that anyone can buy these notes underwritten by the HOA as long as the asset is of sufficiently high quality. Coengineers helps to assures the quality of the asset thereby broadening the investor base. Outside investors such as area merchants, future residents, insurance companies, and even contractors may carry these notes at an interest rate that beats many long term investments. When communities are self-supporting and the money stays home, everyone wins.

Solid value

Crowdfunding condominium renovations may be an excellent choice for some communities to bring their property up from a D grade to an A grade while saving significantly over a bank loan and without imposing a special assessment on the residents. However, it is recommended that an engineering firm is contracted to provide project assurance that will reflect positively to future lenders, insurers, future residents, real estate values, and community resilience. Feel free to contact us at coengineers.com for more information on crowdfunding platforms and the Coengineers Crowdfunding Assurance Package of services.

The Harrison West Condominium Association required a re-pipe of their historic 24-floor residential tower situated in the desirable PSU area of Portland Oregon. Community Engineering Services, PLLC formed a team with engineering specialists Dan Robles, PE, David Coles, PE, Architect Richard Bosch, AIA and a CM consultant. Through the client’s commitment to research, analysis, and insisting upon the services of experienced Engineers and Architects, many unique opportunities were discovered while substantial costs and risks were avoided. The resulting renovation is now considered among the most robust in the Pacific Northwest.

Case Study: Harrison West Tower Re-pipe

Step 1: Piping Condition Assessment

The purpose of the piping condition assessment was to determine without doubt, the actual condition of the existing piping system.This knowledge would drive many decisions such as schedule, material, priorities, proposals, and techniques that could or could not be used when performing the repipe. A typical Coengineers piping condition assessment may be referenced here (Assessment report)

Step 2: Material Selection Process

The HOA board was especially concerned about various piping materials and requested a review of Epoxy Liner, Copper, and various plastic products.Epoxy was rejected (Epoxy Report), Copper was compared alternates such as PEX and Polypropylene (Tech Study Report)

Step 3: Contractor RFI/RFP process

RFI process sought to find the most qualified mechanical services firms who would be willing to undertake such a project.For each, we requested a rough estimate for performing the job in each of three materials; Copper, Copper/PEX, and Polypropylene. The Board selected Polypropylene. The RFI approached a dozen qualified firms in the Portland Area.

Step 4: Contractor RFP process

Of the five top candidates from the RFI process, three were selected for the RFP process.Polypropylene (PP-R) was somewhat unfamiliar for many contractors and represented many unknowns. Ultimately, the board selected McKinstry, Inc due to their excellent reputation and prior experience in PP-R. The polypropylene piping material and complete plumbing system was supplied by Aquatherm.

Step 5: Detailed Statement of Work

As the RFP prices and ideas came in, it was obvious that a different approach to re-piping the building was needed – it would not be possible to rely on the plumbers for a solution. We consulted with Duane Tilden, P. Eng., a member of the Coengineers network, who has re-piped over 40 structures of this type.His recommendation, based on a similar re-pipe he had performed in Canada, was to send the main risers up through the refuse disposal closet This suggestion was a perfect fit for the Harrison West Project and ultimately defined the strategy for this re-pipe.

Step 6: Re-piping The Harrison West.

Renderings by Richard Bosch Architecture, Portland OR

Plan Schematic (click to enlarge) c. Richard Bosch, AIA

Conclusion;

The Harrison West Condominium Association received a ultra-clean, high reliability potable water system using non-metallic components covered by an unprecedented 10-year warranty and $15M manufacturers insurance policy. This project is unique in many important technical areas and will long be considered a landmark re-pipe in the engineering profession. The price of the project is scheduled to compete with copper while the carbon footprint (over copper mining, smelting, transportation, and recycling) is dramatically lower. This unique high-profile re-pipe will have a direct and positive impact on home values for this community.

A bitcoin (lowercase b), as a currency, has several flaws that will continue to limit its ability to replace money as we know it. There are millions of words published on the subject, so I’ll leave it to the reader to assess arguments on both sides. However, Bitcoin (upper case B) as a “protocol” for the transfer of value is an extremely important innovation that engineers must not ignore.

The opportunities for the profession are sweeping and vast, but only if we take action and build this ecosystem ourselves – it is so powerful, that others will gladly do it for us. I will try to explain this opportunity in this short 1125 word article, but please feel free to contact me with in-depth questions.

The Block Chain Protocol

The Bitcoin protocol is a brilliant innovation that cannot be un-invented cfl Jerseys wholesale – it is here to stay and it will appear in many forms long after it sheds the “bitcoin” moniker. Formally called the Block Chain protocol, Bitcoin was designed to solve an age old problem of double spending a currency, specifically, a virtual currency. A currency created on a computer can be easily copied by a computer and thus negates the real productivity that a currency is supposed to represent. The same is still true for money – paper currency is becoming increasingly complex so that it cannot be easily copied, etc.

Today, there are vast institutions from banks, corporations, a legal system, prison system, and unfathomable volumes of legislation (all imposing respective brokerage fees) acting on the behalf of sanctifying the dollar. However, volatility in these very institutions is what threatens the value of the dollar and all currencies upon which the World depends for very basic needs. How well is this working, really?

So, What’s the big deal?

The stakes are high. To invent a new secure and resilient means to rapidly transmit value can in one fell swoop eliminate the friction of the massive institutions on our economy, while also decreasing the volatility and economic friction imposed on society. This is the reason behind the media hype, congressional hearings, declarations of nations, billionaire press conferences, etc. They are all scared to death of the disruptive potential of this little beast. Unfortunately, bitcoin has fallen victim to many of the same deficiencies that it proposes to correct. But these will likely be corrected in the next iterations.

The Train Leaves The Station

The backbone of the Bitcoin protocol is called the Block Chain. There are now hundreds if not thousands of Block Chains in existence independent of Bitcoin. Consider the Block Chain like going down to the train station. At some predetermined time, a train arrives and the doors open. Everyone piles into the train Kamalei Correa Jerseys and after a predetermined amount of time, the doors close. The corollary is that the doors cannot be opened for a predetermined amount of time and no changes, copies, or corruption can take place within that time stamp, no matter what. Only when the train reaches the next location, the doors will open. Once the doors close for a second time, they never open again and a new block is formed. Also, there is no way to retract this process, except by repeating it forward in flutie cfl Jersey a reverse transaction.

The protocol has a few more features that I’ll leave to the reader to research including a public ledger where all transactions are open for everyone to see; and the train gets infinitely long with each new opening. The transactions are opened and sealed cryptograpically and incentives are in place that compensates exchanges (the station masters) and well as those who solve a cryptographic puzzle that creates and maintains the integrity of the public ledger (miners).

Smart Contracts

Everyone knows that money and contracts are intimately related. In fact, money is a contract. A contract is defined as a meeting of the minds. As such, where the Block Chain protocol can efficiently transmit “currency”, so too can it transmit contracts. In fact, it is so effective for articulating contracts that it’s potential to do so far eclipses its ability to replace the existing fiat currencies. But again, money and contracts are so closely related that even this becomes a grey area – both can exist within the Block Chain. This is hugely significant.

There is a special type of contract that engineering societies such as the NSPE should have a laser focus. These are called Oracle Contracts. For example, a client would retain a contractor to build a structure or machinery. They would deposit funds into an escrow account managed by “smart contract” in a block chain. This means that the computer will flip the switches instead of an accountant, banker, or attorney. At certain points in contract and “oracle” – a third party vetting mechanism – will verify that the conditions or performance of the agreement have been met, then they would flip a switch that releases the funds to the contractor or back to the client (or through a predetermined decision tree), depending on objective observation.

It’s All About Efficiency

This is efficient for the contractor because they don’t have to worry about getting paid as long as they meet the conditions of the contract. The client does not need to worry about getting ripped off because they are assured that the conditions of their agreement will be met. The system is efficient because high integrity is rewarded and there Mike Ditka Youth Jerseys is little incentive to cheat which minimizes lawyers, accountants, social dysfunction, and all manners of corruption in a public ledger that provides extraordinary analytics available for societal learning in the public domain.

For the vast majority of projects, products, or policies in the United States and the world, a licensed professional engineer and related scientific bodies are the ONLY qualified Oracles that can be deployed to vet an astonishing variety of Smart Contracts.

Smart Contracts can be written for almost any transaction, but it is inherently an intangible transaction since a “meeting of the minds” is the true nature of the value that they articulate. The implications of an abundant intangible economy vs. a scarce tangible economy are vast. Silicon Valley is pumping millions of dollars into virtual currency start-ups like Ripple Labs while companies such as Ethereum promise to make smart contracts on public ledger block chains as easy to build as dragging and dropping puzzle pieces into a web page. This is here today – it is not a theory.

Banks, insurance companies, and attorneys will be the first to adopt smart contracts because they stand the most to lose by not doing so. Meanwhile, engineers in the US and indeed the World are relegated to the contractor sweatshops or smothered under the weight of towering hierarchies. Tragedies such as the Oso landslide and global warming remind us of the absence of engineering oracles advocating for society and our planet. It is imperative, now, that engineers embrace Block Chain Protocol Technologies and the deployment of Smart Contracts to elevate the profession to the top of the proverbial food chain before there someone else does it for us.

The Reserve Study is one of the most important documents that a shared asset community can own. Coengineers, PLLC complies with the more stringent standard of the Canadian Reserve Study Act combined with the ASTM E2018-08 standard for building condition assessments where practical. This standard of care provides the Board, The Management Company, and the community of owners with the highest level of legal and technical resilience in the industry. Don’t sell your community short on reserve fund analysis. No other purchase can pay for itself in multiples as a rock solid reserve study.

The Regulations to the Condominium Act 1998 (Canada) note who is permitted:

Members of the Appraisal Institute of Canada

Persons who hold a certificate of practice within the meaning of the Architects Act

Certified Engineering Technologists

Architectural Technologists

Holders of a CRP (RS – USA) designation

Persons who hold a certificate of authorization within the meaning of the Professional Engineers Act

Quantity Surveyors

Graduates Polytechnic University with a Bachelor of Technology new (Architectural Science) Building Science or Architecture option.

Notwithstanding the above, there are regulations on who cannot prepare the Study which include members of the Board, the condominium’s property manager, certain relatives of Board members, an owner or a resident in the-condominium. In addition, the person/company being considered cannot have any direct or indirect interest in a contract or proposed contract with any Board member outside of his/her capacity as a Board member.

Aside from professional credentials, you want someone who has demonstrated experience with condominiums. Notwithstanding the Study being a budget document, it is also a technical report that involves the review of architectural and engineering drawings and the visual inspection of common elements. A trained eye can identify building problems for which repair costs can be included in the Study. In addition, much of the future Reserve Fund expenditures will be due to building envelope (roofing, windows, exterior cladding) and structural restoration (parking garages, balconies). These costs are often very site dependent for which “costing manuals” are of little use. Companies that have designed and administered these types of rehabilitation projects will be better suited to provide budgets for similar future work that the Corporation may be facing.

The regulations to the Condominium Act stipulate the minimum liability insurance requirements; $1,000,000.

What Information Does the HOA Need to Provide?

Once you have hired a consultant, he/she will require information about the condominium corporation. This will include the following:

As-built drawings and specifications.

The Declaration and Description.

Reciprocal cost sharing agreements.

Previous reserve fund studies.

The most recent audited financial statements.

What the current annual contribution to the Reserve Fund is.

Repairs or replacements to the common elements that have already been completed and when. Similarly, scheduled future work needs to be accounted for.

A summary of problems being encountered by the Corporation that should be reviewed. As an example, water penetration concerns.

What Is The Process?

The process is as follows:

The consultant is provided the above information. One of the most important are the drawings. They will be reviewed prior to visiting the site in order for the consultant to become familiar with the overall design and construction schemes.

Site inspection. In order to have an understanding on the current condition of the common elements, visual inspections are undertaken. Problem areas noted above can be reviewed. After the first study, the next study update can be completed without a site inspection. The next update must include a site inspection.

The report is then prepared (see next question). The drawings are used to “take-off” quantities such as roofing, exterior wall cladding, asphalt, hallway finishes etc that will assist in preparing the replacement/repair cost budgets. It is recommended that a draft report should be submitted in order for the Board and Property Manager to review it prior to it being finalized. The consultant should be available to attend a meeting to review the report.

Upon receiving direction from the Board of Directors, the Reserve Fund Study is finalized and submitted.

What Is The Report Format?

Each consultant will have a different format, but in general, the Reserve Fund Study will contain a Physical and Financial Analysis:

Background Information about the Corporation in general; where it is, its age, a general description of the property as a whole.

Inspection Report. Based upon the results of the site inspection, the report will provide an itemized overview description of the major common elements. This will include general condition, the need and timing for remedial work or replacement and any other information that the Board should be aware of.

Information Tables. There is typically a table that summarizes the common elements in terms of current age, life expectancy, remaining service life and current and future cost budgets.

Expenditure Tables. The data from the Information Tables is summarized to show in a tabular format when the itemized common element repair/replacements are estimated to take place. For each year, these expenditures are summed. The annual projections must be a minimum of 30 years commencing in the year the Study (and updates) is prepared.

Cash Flow Tables. Based upon the estimated expenditures, different contribution plans can be provided. Often, one plan includes the contribution level currently being used as a form of comparison to other scenarios.

What is the Funding Plan?

As part of the Financial Analysis, the study must in recommended funding plan projected over 30 years from the date of the study. The plan must show:

The estimated cost of major repairs and replacements based upon current costs.

The same costs adjusted to account for an assumed inflation rate. The inflation rate must be stated in the study.

The opening balance of the reserve fund.

The recommended amount of contributions to the reserve fund determined on a cash flow basis that are required to offset adequately the expected cost in the year of the expected major repair or replacement common elements and assets.

An estimate of the interest earned on the reserve fund contributions based upon an assumed interest The study shall state the assumed interest rate. The Condominium Act requires that interest generated by the Reserve Fund is reinvested into the Fund.

The percentage increase in annual contributions to the reserve fund for each year of the 30 year study.

It is commonplace for businesses and community associations to retain an accountant, or a lawyer, or a financial advisor; but how often does one think about retaining a Professional Engineer?

Engineering oversight on your technical projects pays for itself in lower total cost, higher quality, financial security, and legal resilience, and for an investment cheap authentic cfl Jerseys that may be surprisingly reasonable compared to the cost of a failed project. An engineering opinion can move mountains with contractors, insurance companies, banks, and lawyers.

1. When contractors can’t seem to solve the problem after repeated attempts.
2. If you will require bank financing for the development, purchase or repair of your property or machinery.
3. If insurability of your property or machinery is imperative to the viability of your project.
4. If you hold fiduciary responsibility to an association for the expenditures of community funds on property, machinery, or maintenance.
5. If disclosure is regulated by law such as water damage, title history, reserve funds, or proof of performance for property or machinery.
6. When you need a second opinion supporting a large expenditure.
7. When you need a licensed professional to oversee construction.
8. When you are making a warrantee claim.
9. To perform independent forensic studies or pre-emptive failure analysis.
10. When due diligence is required in a litigious environment.

Engaging an engineer may feel like a daunting task since many engineering firms Authentic Jurrell Casey Jerseys are structured around big projects serving large corporations, developers, or government. And yes, we are a bit quirky, we speak a different language, and sometimes we may seem socially distant. But there are many small engineering firms cfl Jersey advertising or independent engineers that can tackle a wide variety of problems quickly, efficiently and without huge overhead.

Fortunately, it is easy to check the licensure status on an engineer to be assured that they have been signed-off by other engineers, that they have passed all of their engineering board exams, and have no violations on record. The engineering profession is tightly regulated by law with strict rules and durable code of ethics so that the public can be assured well beyond many non-licensed professions. Also keep in mind that nobody cfl Jersey customization can offer engineering services to the public without holding a valid license.

Community Engineering Services brings a wide variety of experience in major engineering disciplines to your project, when you need it at a price that makes sense. Community Engineering Services, PLLC is a collection of independent engineers that collaborate with each other to bring forward the best solution to your important technical problems. We hope to deliver engineering closer to the public in a new way in order to support the infrastructure of communities.

PEX is relatively new material (less than 20 years) that has gained widespread acceptance in the new construction piping and building renovation repiping for potable water systems.

The reasons are obvious – PEX has flex. The material is inexpensive AND the installation is fast and simple. PEX is especially desirable on repipes since it can greatly reduce the size of the wall intrusions as plumbers can snake the material across smaller openings.

Unfortunately, there are some vulnerabilities that the owner needs to be aware of so that they can specify the right PEX components for their specific job. Keep in mind that contractors are only liable for workmanship, manufacturers are liable for material defects, and the owner is liable for everything else. While we would always recommend obtaining a professional engineering opinion, this short article will help the owner understand what PEX is and how to manage the big vulnerabilities to using PEX: brass fittings, UV exposure, water quality, and even vermin!.

Cross linked Polyethylene – advantages

Cross Linked Polyethylene is a modification of polyethylene plastic commonly found in children’s playground equipment. Cross linking means that the individual ‘mers’ in the ‘polymer’ are bunched up into knots instead of aligned in direction. This allows the material to return to its original size and shape after being stretched. This is great for holding on to fittings, bending around corners, and expanding under pressure, heat, or even freezing conditions.

PEX is very fast to install and can be threaded through walls without having to necessarily cut out large sections of wall board. Connections can be visually inspected with great reliability and precise measurement is not a critical as materials such as copper or CPVC. PEX has been widely used for several decades with broad acceptance in the market and universal familiarity in the plumbing trade. Many different companies support the PEX products with accessories and connectors such as manifolds, hangers, and specialty adapters.

Preventable Problems With PEX

PEX is clearly not without its own problems, fortunately these may be avoidable. In the engineering profession, we understand that it is rare for one single problem to cause a failure, rather, it is the combination on two or more problems that lead to the major accidents. Many times accidents occur when one party does not communicate with another. With PEX, the owner, contractors, builders, maintenance personnel, etc, must be aware of the system configuration and have a plan for interacting with the system. For this reason, engineering counsel is often warranted in a complex system.

Dezincification:

Brass is an alloy of copper and zinc. When the zinc content is too high, it can corrode away under certain water conditions leaving a weak and porous copper shell, which can lead to failure conditions ranging from persistent leaks to a rare breach of a pressurized line. At least one class action lawsuit was filed against the makers of a particular brass fitting that was failing in service causing substantial property damage. The root cause was found to be the dezincification.

Most of these defective fittings were found in big box hardware stores and made cheaply overseas. This suit was settled for 90 million dollars or so and the problem is now easily avoidable. Other problems have been found in areas with high mineral content such as Nevada and Hawaii. The owner should specify low zinc brass fittings or use ‘engineered plastic’ fitting components.

Dezincification in the Pacific Northwest

Coengineers recently conducted a more extensive analysis for a condominium association in the Pacific Northwest. One interesting feature that we encountered was strong disagreement in the engineering community whether dezincification presents a problem in the Pacific Northwest or not. In cases of suspected dezincification in the PNW, it may be prudent to perform a limited test. If there are currently no leaks, it is important to only disturb the minimum amount necessary to identify the composition of the zinc used in your system, then watch and maintain the system. A case study for conducting due diligence may be found here.

Chemical leaching

PEX was also suspected of leaching controversial chemicals such as MBTA, TBA, BPA, and other chemicals that are considered toxic. While we cannot testify to the truthfulness of this claim, the State of California has banned PEX in many building structures. Given the segmented nature of permitting jurisdictions in the US, it would be wise to be aware of these concerns.

It is generally accepted that of the three types of PEX (called type A, B, or C), type B is the only formulation that does has not been suspected of any leaching considerations. As such, a leaching concern is easily avoidable (given proper attention to other considerations such as strength and temperature ratings among the 3 varieties). Owners should be diligent to specify the type of PEX that is being installed.

Ultraviolet Radiation:

The stabilizers in PEX are highly vulnerable to breaking down under UV radiation – while some sources may claim that some UV exposure is acceptable, we advise that all precautions should be taken to shield this material from UV rays. Even fluorescent lamps and CFLs are to be avoided especially where ceiling route may interact with recessed fluorescent lighting. There are many shielding products available to solve this problem. However, PEX is best suited in total darkness.

Agressive Water Chemistry:

PEX is also known to be slightly vulnerable to chlorinated water and possibly copper ions resulting from copper corrosion upstream. The temperature rating of the water must be strictly adhered to. Alone, these factors may not be worrisome in many application, however when combined with the the other aggravating factors, the aggressiveness of the water may amplify hazard potential.

Externalities:

Most builders will shield a PEX installation from a future owner or contractor, say, hammering a nail into the wall. For this reason, the homeowner should be aware of the potential to cause a leak by intruding through the wall with a nail or saw. Some contractors will use a thermal measurement device to identify water piping before cutting into a wall for any other reason. It is important for the owner to know where the pipes are before cutting into a wall.

We have seen several instances where mysterious leaks appear in PEX installation corresponding to the extermination of rodents. The poison that is often used to kill small animals causes them to become very thirsty and seek water. Rats appear to be especially clever and can discern the sound of water flowing through PEX pipes – then rapidly chew through the PEX to access water. Make sure that ALL hired contractors – from electricians to exterminators – are licensed and experienced when interacting with a building that has a PEX system.

Conclusion:

It can be seen that failures will most likely occur from the combination of two or more seemingly unrelated problems. It is rare that any single person or contractor is aware – on a scientific basis – of all these factors and the way that they can interact with each other.

Further, The owner or maintenance personnel cannot be expected to know all of these details – they just install what they buy at the supply shop. It is important that the owner stay aware of these vulnerabilities of PEX and watch the installation closely.

A vigilant owner will hire an engineer to oversee the specifications and construction

The standard reference for service life of building components such as HVAC systems, Plumbing, air handlers, Digital Controls, and elevators, etc. may come from many different reference books whose authors have deduced, observed, or tested a sample of similar components to produce a “mean” service life. It is unlikely that any single author has lived long enough to test each sample in service, so some assumptions need to be made when arriving at these estimates.

The “mean” is a similar number to an “average” and represents the number of years at which half of the sample will have failed. The assumption is that the failures occur on a perfect “bell curve”. A bell curve is a way to describe a symmetrical pattern where the first sample to fail and the last to fail are equal distance from the “mean”.

However, the likelihood of all components failing at the exact same time is very slim. On the other hand, the likelihood that you want to replace worn out components all at the same time is very high. Herein lies the dilemma for the building maintenance staff.

To make matters worse, there are many other factors that will impact service life of a system and its components including improper maintenance, variable duty loads, high-cycling, abuse, neglect, proper adjustment, etc.

For example; a college dormitory may have higher loads in the cooler months than in the warmer months when school is out. Commercial buildings are subject to internal heat loads from computers and machinery. Residences are subject to internal moisture from showers, dishwasher, and condensation, etc. Each condition has a different impact on the service life of the components.

Many facilities have highly capable maintenance staff. Only they can, and should, make a final determination when a component or system should be replaced. The owner is always in a better position to compare maintenance costs with replacement costs in determining when a component should be replaced.

From an engineering point of view, a major remodel of any building is best conducted simultaneously among several systems when the building is unoccupied. Workers generate disruption, dust, downtime, and operational hazards – it is always best to do as much remodeling as possible at the same time.

A major remodel is generally due in 20 years increments. 20 years coincides with mean mechanical limits of things like seals and bearings and fan blades and valves. The 20 year mark also coincides with technological advances for systems such as digital HVAC Control Systems, elevator switches and controls, lighting system or lighting technologies, etc.

In addition, 20 years also coincides with the time after which many manufacturers will no longer support older equipment with OEM spare parts or service agreements. Finally, after 20 years of service, depreciation schedules, insurance policies, and integration with new components further diminish the practical service life of the component.

For these reasons many Property Condition Assessments will recommend further analysis to mitigate immediate building needs, a sturdy maintenance plan to rebuild or replace sub-components of major systems, and a well-planned major remodel at 20 years, 40, years, 60 years, etc. We can debate service life of a HVAC compressor all day long, but the most practical way to own a building is with proactive maintenance and periodic major remodeling.

Summary: Epoxy is an amazing substance when applied correctly. But what if it is not?

Epoxy is a magnificent substance used in many important applications where strength, hardness, moisture protection and strong adhesion are a requirement. Epoxy coatings are used to protect industrial applications from factory floors to reinforcement bar embedded in Al Kaline Jerseys concrete. When applied correctly to a strong surface, few coatings are as tough as epoxy.

Recently, epoxy manufacturers have developed a lining process to coat the inside of an old potable water system with epoxy. The blow-in epoxy pipe liner method is touted as a fast, 60 year, non-invasive, and inexpensive alternative to re-piping a whole building. However, when applied incorrectly, epoxy coatings can create a dangerous sense of false security especially where hidden from view such as the internal surface of a pipe.

Many blow-in epoxy pipe liner failures are appearing in the field where litigation is often protected by gag orders thereby never reaching the public domain. This document identifies a wrinkle in the market that supports the rapid liner industry as well as the consequences of an unseen failure, should they occur.

This article arrives at the following conclusions:

The potential for epoxy liner failures may be high in galvanized steel potable water systems.

There is no reliable way to inspect the adhesion of epoxy inside a pipe.

If an adhesion failure is found, there is no practical way to repair it except re-pipe — so, why not just re-pipe?

Blow-in Epoxy pipe liner failures may typically occur at the precise location where the galvanized steel pipe is already at its weakest.

These observations are very important for the insurance underwriter who would otherwise classify a water system that has been repaired with epoxy liner as a “new” system. These observations are important for the forensic analyst that may determine the cause of a major water system failure on a condition other than being weakened by the epoxy coating. These observations are very important to the insurance broker who may inadvertently force a condominium community into an epoxy liner “solution” as a condition for maintaining coverage on their property.

Recommendation
Insurers should allow their condominium clients to perform a condition assessment without threat of cancellation. A small leak does not necessarily mean that the big rupture is imminent. In any case, epoxy does very little to eliminate the risk of a large rupture and possibly increases the likelihood. Then the insurance industry should work with the community to save enough money to perform a superior re-pipe with new materials such as polypropylene or copper. Together, a strong case can be made for the reserves or lending process. In the long run, a superior re-pipe may cost several times less than an epoxy “solution.”

The Vicious Circle
Something as simple as a pinhole leak can generate thousands of dollars of water damage claims. Imagine what a fracture in a main riser cascading down 10 floors of luxury condos can cost? Unfortunately, many insurance underwriters believe that after a few small water claims, the big one is imminent. This may not necessarily be the case. Yet, many a condo is put on notice that they will lose their coverage unless the whole system is immediately replaced.

Long before the first pinhole leak, insurance companies stipulate in their policies that they are not responsible for a pipe failure if the condominium board is aware of the problem and fails to take corrective action. This condition essentially removes the incentive for the condo board to perform a quantitative piping condition assessment — if they don’t know that there is a problem, they are insured. If they do know that there is a problem, they are not insured. This creates a compound moral hazard because they have no basis for saving reserve funds for a replacement.

After awhile, a few small leaks may appear leading to some minor insurance claims — this can trigger the threat of insurance cancellation for the condo. But this is the least of their worries; the condominium construction market is renowned for litigation, and many insurance companies make it very difficult or impossible for a contractor to be insured for condominium work. Condominium homeowners associations quickly learn that many contractors are simply unable or unwilling to work on condominiums.

If the homeowners association fails to save for a re-piping project, they are forced into an expensive bank loan from lenders who are equally wary of litigation … this can become a Orlando huge mess far beyond the knowledge and capability of a condo board to manage effectively. The inability to manage a project in a litigious environment leads invariably to more litigation!

Herein lies the wrinkle in the market caused largely by the insurance industry betting against itself thereby creating a vicious circle that has very little to do with actual plumbing. In the midst of this condo / contractor / insurance / banking madness arises the epoxy liner salesman who is quick to provide everyone with exactly what they need — a cheap, fast fix.

The Epoxy Liner Process
The blow-in epoxy pipe liner process involves isolation of sections of the existing pipe, drying the pipes with hot air and then sandblasting the inside walls with pressurized air and an abrasive mineral that is supposed to remove all corrosion, leaving bare metal in order to prepare the pipe walls to accept adhesion of the epoxy liner. Once prepared, the paint-like epoxy is blown through the pipes in a liquid state using pressurized air. The epoxy is then “cured in place” either by the application of heat and/or the passage of time (pot life).

A Case Study
A reputable plumbing contractor in the Seattle Area provided samples of epoxy liner sections that were removed from at least three properties and which failed within 4-7 years of entering service.

Failure Modes
The following video demonstrates common epoxy liner failure modes correlated to available literature on epoxy liner vulnerability. The most common vulnerabilities of the blow-in epoxy pipe liner systems are associated with the planning and quality of the preparation as well as training of the applicator personnel.

Literature Review
Epoxy coating of steel is a widespread practice in construction and mainline water service2 3 4. While epoxy is tested safe to drinking quality standards by independent studies1 and national water quality standards6, any such “certification” is dependent upon actual adhesion to the surface of the pipe. The failure modes and vulnerabilities of epoxy are widely known and highly consistent in the progression7 of adhesion failure. It is also widely recognized that the project planning, surface preparation, and precise measurement and application of the ingredients to the substrate are the most significant variables in determining the probability of a successful epoxy coating assignment.

These factors are addressed in significant detail by the U.S. Army Corp of Engineers3, The American Water Works Association9, the American Society of Testing and Materials10, the Society of Protective Coatings, etc., who have all developed standards for the planning, preparation, measurement, and application of epoxy coatings. It can be assumed that if, and only if, these standards are followed and documented, then failures in epoxy coatings will not occur.

A comprehensive collection of tests and inspection criteria has been developed for epoxy coatings in any number of applications including internal water pipe coatings.3Such tests as the knife blade test or those tests specified in ASTM F2831 are simple, fast and conclusive.10

The Epoxy Paradox
Epoxy coating is extremely strong and adherent if, and only if, applied correctly.7 The question arises that if an application should fail a test, inspection, or in service, what is the contingency plan to remediate the flaw? How will the epoxy be removed and how will the re-coating be applied? If re-pipe is the answer, why wasn’t re-pipe considered in lieu of epoxy in the first place? If a single failure is found, what test sampling strategy must be applied to give a high likelihood that no other flaws exist in the system? Under what warranty claim would a failure be covered and to what extent will total coverage be warranted? These questions would be imminent in any litigation related to epoxy failures.5

Double Jeopardy: When an epoxy failure does happen, it is likely to occur at the location where the pipe is already at its weakest; i.e., pitted areas and threads. As such, a poorly applied epoxy liner could weaken a pipe considerably.6 The result could be a catastrophic high-volume pipe failure requiring a high insurance payout, which would not otherwise be attributed to epoxy coating.

Therefore, engineering and construction management representation and oversight can help assure that the epoxy liner material and contractors are aware of the expectation that industry standards will be applied. Independent testing should be applied as a condition of the contract bidding and warranty claims so that they may adjust their pricing to meet customer expectations. Again, epoxy is an amazing substance when applied correctly. But what if it is not?

Disclaimer
Engineering opinions rendered by any author are solely for the purpose of education and are not engineering advice. If you use any opinion presented in this document or on the website in any way whatsoever, you agree to hold The Engineer and the website harmless of your use of those opinions.